Vote on Account 2014: IT sector has played crucial role in employment generation

Growing importance of offshore business model, a sustained quality of deliverables, global competence, and favourable government policies helped India information technology (IT) companies grow rapidly over the past decade. The sector also played a crucial role in employment generation during this period at a time when the manufacturing sector, which was traditionally responsible for creating job opportunities came under pressure to rationalise workforce amidst increasing automation and rising cost of raw materials due to higher inflation.

Over the next decade, the sector is likely to retain the growth tempo given its export orientation even as the domestic economy continues to revive from a marked slowdown. But, the rate of employment generation is likely to taper with increasing focus on employees with multiple skill sets.

The journey so far

IT exports including software, business process outsourcing (BPO), engineering, R&D, and products is expected to clock $ 86 billion in FY14 according to estimates of the industry trade organisation, Nasscom. Exports were around $13 billion in FY04 reflecting a compounded annual growth rate of 20.5%. The share of IT exports in total national exports including merchandise and services rose to 25% in FY2012 from just 4% in FY1998.

The impressive growth of the sector reflects the high quality execution capabilities of a well-trained staff and the ability of India IT players to compete with global giants. In addition, the credit also goes to growth enabling policies of the Indian government and lesser interference by authorities during the initial stage of growth.

The Software Technology parks of India ( STPI) policy that exempted export revenue from corporate tax helped the IT export sector to invest more in expansion during the early stage. The policy elapsed in February 2011. A new policy related to Special Economic Zones (SEZ) was introduced wherein export revenue from activities in these zones would be tax exempt.